Moving on

India is scheduled to get two very large crude carriers with 4 million barrels of Iranian oil this month - one each at Paradip in the east and Kochi in the west. Both the vessels were loaded in April – the month when the United States announced an end to the waivers provided to eight countries including India on purchase of Iranian oil. With the last two consignments, India, owing to the US's unilateral decision to isolate Iran, will have to replace Iran with another nation to fulfil its crude requirement. While reports largely cite potential turbulence in the global oil price index with Iran's shutdown, Trump remains confident that Iran's exit from the oil market would not raise the global oil prices. His administration strengthened his outlook of the same while OPEC members assured him of adequate supply to nullify Iran's absence. Pillorying Iran, and Venezuela as well, then came at no loss for the US who had earlier granted 180-day waiver to its partner countries on Iran Sanctions. India had made efforts to acquire a second waiver but clearly, that did not capitalise. And, it should not. India can accrue a lot from the current state of affairs. With the two ships delivering the last of Iranian crude, Indian buyers have been aware of the declining import of Iranian crude since last year, more evident since the turn of the calendar. Statistics cite that India's overall imports from Iran in January to April 2019 fell by nearly 45 per cent to 304,500 bpd compared with 552,000 bpd a year ago. Indian buyers preferred Iranian crude which came with discounts on shipping, insurance, and freight and longer credit period against US Crude which comes at a hefty price. Now that Iran's out of the fray, the nearly 10 per cent requirement which it supplied has to be filled. Apprehensions exist that Iran's absence may cause inflation owing to the primitive understanding that hike in oil prices is directly proportional to inflation. Well, it may just not be that. Even if we take it that Trump's assurance is a fluke and there is a global price surge, which then will have a cascading effect on petrol and diesel prices in India. This, in turn, will cause inflation. However, statistics cite another story. Since 2016, a rise in oil prices has not fuelled inflation. Oil energy is primarily and majorly used for transportation (as fuel) and not production. This invariably means that the cost of fuel impacts the price of commodities transferred; predominantly food and vegetables. And, food accounts for a large chunk of the retail price index, changes under which reflect inflation levels. Now, the rise in agricultural production has ensured lower costs of vegetables and food items despite soaring oil prices. Even in the manufacturing sector, oil is restricted to only transportation and not production since coal is the main component to fulfil energy requirements. Adding to the fray is India's impressive export segment of petroleum refinery products which account for one-sixth of India's total exports. So counterbalancing crude import with refinery export yields a favourable position in the trade deficit. Though, the crude requirement may still be felt which then can be fulfilled through increased supply from Iraq or Saudi outlets to compensate for Iran's share; replacing Iran's share with the US would cost us more considerably. So with the demands met, India may not feel the pressure that initial reports cited nor would it suffer an inflation surge. But what India could do in this situation is a comprehensive development and promotion of existing renewable energy alternatives. For India, this may be perhaps the most optimal byproduct of the US's draconian decision to isolate Iran's financial pipeline. The 10 per cent deficit in crude that India faces has several alternatives but it is also a leverage point for the nation to catapult its renewable energy commitments and enhance the existing infrastructure for the same. India already initiated the International Solar Alliance with ambitious targets of solar energy capacity. Now, it needs to transfer a share of oil requirement towards alternative energy sources and gradually diminish the nearly ten per cent oil requirement which was fulfilled by Iranian crude. The opportunity is there but it cannot be done overnight. However, a commitment in that direction would ensure mammoth transcendence in India's oil requirement as well as power narrative. Owing to India's SDG commitments in the power and energy sector, the opportunity to utilise Iranian crude deficit, with safeguarded inflation apprehensions, can yield a lot. While a majority of oil requirement can be met by Iraqi and Saudi imports, Iranian share can be diminished and replaced altogether by non-conventional energy sources. This may be the only silver lining in the withdrawal of waivers by the US but it remains a potentially constructive solution to the imminent crisis.